Political risk will be the top catchword for investors in India over the next two months as the country moves into full-blown rhetorical election campaign mode. With the last parliament session winding down decision making has come to a standstill in the run up to the national polls in the world’s largest democracy until a new government takes over in May.
This puts to rest any hopes of a quick recovery for an economy that is limping along at its slowest pace in a decade, with growth expected at below 5 per cent for the second consecutive year. The collapse of growth from well over 9 per cent in the Congress-led coalition government’s first term in office is widely expected to dent the fortunes of the ruling alliance in the general elections.
While opinion polls show mounting popular support for the main opposition Bhartiya Janata Party (BJP), led by charismatic but controversial Narendra Modi, he is unlikely to grab a majority in the 543-seat Lok Sabha or the House of People, the main law-making lower house of parliament that decides who forms the government in New Delhi.
The most plausible scenario is a BJP-led alliance taking over the reins, a possibility that would warm the global and domestic investors because of the 63-year-old Modi’s free enterprise credentials in running the state of Gujarat for more than a decade. However, it is foolhardy to predict election verdict in the subcontinent because of powerful and numerous regional groups.
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